Leslie Michelson: Doctor to the 1% (and Maybe Someday to You)

You know how the affluent hire investment and tax specialists to run their finances? Leslie Michelson does the same for their health care.

By

Joseph Rago

Sept. 21, 2012 6:57 p.m. ET

Los Angeles

The rich are different than you and me. Not only—yes, yes—do they have more money, but they've also heard of, and many have hired, Leslie Michelson. He's their de facto primary-care doc, though he holds no medical degree.

Mr. Michelson is the CEO of Private Health Management, an ultra high-end company that borrows from concierge medicine, managed care, applied-sciences research and information technology while fitting into no neat category. The best analogue might be the investment and tax specialists that the affluent employ to run their finances; Mr. Michelson does the same for their health care. "Like private wealth management, just far more important," he quips in his modern Beverly Hills offices, all green glass and steel, white walls, white floors.

Mr. Michelson—who sounds remarkably like the actor Michael Douglas—has spent 30 years in the health-care business and thinks he has learned what's wrong and how to fix it. And how to profit from it. Thus Private Health, which he founded in 2007.

"We don't have time to wait for the system to heal, so we cure it for our patients through sophistication, brute force and technology," Mr. Michelson says. On one level he offers a glimpse into what it takes "to get people the very best health care in the world," as he puts it. Yet the real interest may lie in what Private Health's business model—reported in detail here for the first time—reveals about the future of U.S. health care.

Private Health caters to "high net worth individuals" and to businesses that retain its services for their executives as a benefit. Mr. Michelson says he serves between 12,000 and 15,000 clients, "principally in private equity, hedge funds, professional and financial services firms." Private Health is closely held and doesn't disclose its membership fees, though Mr. Michelson does say he runs "a business for people who can afford us," the implication being that if you have to ask . . .

ENLARGE

Terry Shoffner

Strictly defined, Private Health isn't part of the growing phenomenon known as concierge medicine, where doctors charge a retainer for more face-time and personal attention, and often take their practices off the commercial and government payment grid. Private Health isn't an insurance company either and maintains no contractual or financial relationship with its doctors. "We don't buy access," Mr. Michelson says.

A large part of what Private Health does is simply match patients with physicians, which isn't as obvious as it sounds. "People do not know how to choose doctors. It's one of the most important things you can do to promote your own health and that of your loved ones, and it's: 'My friend's cousin's relative went to Dr. Smith, and he was terrific.' Well, how do you know he's terrific?"

So Mr. Michelson built a series of proprietary algorithms to distinguish "the few who are the very best" from "the many who are very good," based on "the factors that predict excellence." For example, the premier caregivers for metastatic cancer are usually academic researchers on the cutting edge, not general oncologists. The best orthopedic surgeons perform many procedures as they master the clinical learning curve, ideally for a single injury.

His referral database includes 2,200 specialists across 160 medical fields, "reified into far finer groupings of disease than is standard practice." He says that "the world becomes so much clearer when you are able to identify the physician with the deepest and narrowest expertise in exactly what you need."

Mr. Michelson says doctors like to belong to his informal network because they're "interested in excellence and what we stand for." He adds, with more than a little euphemism, "In a world in which 98% of the conversations are about cost containment, it's a joy for them to have somebody who's focused on enhancing quality only." No doubt true, though it probably doesn't hurt that providers also like to have a relationship with his client base, the sort of people who become university patrons or donate a hospital wing.

But Private Health is also an adaptation of the rapid advance of modern medicine, which throws off ever more and better ways to diagnose and treat disease and ultimately extend lives. The medical journals now publish 60,000 articles each year, Mr. Michelson notes, a doubling over the past decade. The half-life of a specialty is short, continually disintegrating into subspecialties, and sub-subspecialties, to the point where some doctors devote their whole career to one variant of one illness.

"As the biomedical revolution took off," Mr. Michelson says, "there should have been a counterbalance of somebody taking the position of the general contractor, the manager, and investing in the systems, the technologies and the processes to keep up." But the organization of medicine as an industry didn't change.

So the health-care delivery system, to the extent it qualifies as a system, "has no quality control, no integration, no coordination." Doctors "tend to operate in an independent and isolated way, and even specialists who've been treating the same patient for years and years typically never, ever speak to one another."

Private Health is designed to backfill these gaps whenever one of its patients has a medical emergency or complex condition, say, a traumatic brain injury or newly diagnosed cancer. A personal-care team parachutes in, led by a clinician employed by the company, and compiles a brief on the patient. They centralize and digitize the patient's medical records, usually dog-eared paper piles that can run to thousands of pages. Research scientists immerse themselves in the latest findings and treatment regimens for the particular condition involved.

Tests are double-checked—biopsy tissues are sent to an outside pathologist, MRIs to another radiologist. For an era of targeted therapies, Private Health runs a full battery of molecular diagnostics "to sequence the entire three billion base pairs of somebody's DNA in a couple of hours," Mr. Michelson marvels.

The goal is to ensure an accurate diagnosis and lay out all the treatment options. Private Health functions as a kind of running, independent second opinion. It operates in the twilight zone where there isn't a "best practice" for when and how to treat, but a continuum of risks and benefits that vary from patient to patient.

The clinician helps locate the right experts, Mr. Michelson says, and then works to "fuse together all these multiple specialists in a single team with a single objective." There are "no redos, no lost scans, no ambling around going from specialist to specialist, trying to figure out what's going on." The most frequent reaction is: "This is how medicine was always supposed to be practiced."

The idea for Private Health came to Mr. Michelson when he was running the Prostate Cancer Foundation, the multibillion-dollar philanthropy Michael Milken set up in 1993. Prostate cancer is a common disease but treatment isn't straightforward. Surgeons end up recommending surgery, radiation specialists radiation, still others "watchful waiting," etc.

Mr. Michelson says people started asking him for advice, which led to the prototype for Private Health. Eventually he decided to improve his process across more diseases and help more people.

One irony is that for all its white-glove extras (a research department, genetic profiling), a lot of what Private Health does are core functions that patients would value and providers or insurers ought to be doing but rarely do (case management, using computers). Why is that?

Cost is part of it. "It's too expensive for us to do it for everybody right now," Mr. Michelson says. Another part, he thinks, is that "the incentives are attenuated because of the structure of insurance," namely, job-based coverage.

Since businesses are the customers, not the individuals who change jobs every three years on average, insurers "act rationally" and don't invest in services with "short-term costs and long-term payback." Mr. Michelson thinks the better option is for businesses to convert to cash vouchers so their workers can buy portable policies. Right now, there is "no meaningful information about the quality of care, virtually no information about price, and no sensitivity to price," but that would change if the insurance industry built "an enduring relationship with consumers," he says.

"I understand that it is woven into the fabric of our society that employers can and should continue to pay for health insurance for their employees," Mr. Michelson declares. "But why, circa 2012, should HR departments be selecting and administering one or two or three plans for a thousand or a hundred thousand workers and their dependents? You don't need a Ph.D. in economics to understand that you will guarantee suboptimization."

Economists, if not politicians, are with him on that one. One thing everyone on the political left and right does seem to agree on, however, is that more coordination is how medicine will become more efficient over time. The debate is over how to do it. Liberals think the government can tell providers to do the same things Private Health does through regulation, which the Affordable Care Act calls "accountable care organizations," and therein lies another irony.

Another reason Mr. Michelson's model hasn't taken hold, he thinks, is that "the level of regulation that you need to deal with to be creative within health care is staggering." He says only nuclear energy can compete for complexity. Layer on layer of rules and bureaucracies means that "the entrepreneurial energies that have so transformed so many other industries aren't in play."

The final irony is that the Obama health-care reform passed in the name of equality may drive more and more patients to companies like Mr. Michelson's, especially if regulation causes quality or access to decline. Universal coverage is never as universal as its proponents want it to be, and it usually results in a double- or triple-tier system as the upper-middle classes flee. Then the medical ethicists condemn the disparities based on ability to pay that their own programs helped to create.

"What do I say ethically about that?" Mr. Michelson muses. "The notion that we're moving toward a two-tiered system misses the point by decades. We already have a multitiered system—the chasm between the very best and the very worst is much wider than people realize."

He continues: "I think it's a hard truth that if your aspiration is to provide everyone the highest quality of care, then you have precluded yourself from providing anyone with the highest quality of care. As an economic, structural, societal matter, it's impossible to achieve.

"I think we're a country where not everyone is entitled to wear the finest suits, not everyone is entitled to live in the biggest houses. We're a country where economic forces work. What we have is an obligation to provide the people who are at the lowest part of the socioeconomic spectrum a base line safety net of fair and reasonable care. We literally have not been able to do that for decades. The poorest people in this country get the worst care in the industrialized world. And even the richest do not get the quality of care they think they should be getting.

"By the way—let me be very clear—I'm a Democrat. I've been a Democrat for my entire life. I worked for President Carter. But I don't have a problem with a market-based health-care system that protects the most vulnerable and at the same time allows people who have the wherewithal and capacity to get an extraordinary level of care."

As for elitism, Mr. Michelson says, "We have been retained by some of the wealthiest people in the country, who were getting terrible care—terrible—and spending a lot of money for it." In any case, he says "our goal, our investors' goal" is to democratize his model. "Innovations such as ours have to start at the high end, because you have to figure out how to do it. And then you figure out how to systemize it and take the costs down and deliver to the mass market."

Americans, says Mr. Michelson, are "extremely good at buying things." But they don't know how to buy health care, and his company can help by giving them the tools they need. "The entire engine of American consumerism is missing in health care. What a preposterous thing."

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